About SIF

OverviewThe Student Investment Fund (SIF) Program is a one-year experimental course consisting of two three-unit finance electives in “Applied Portfolio Management” (i.e., FBE 553A & FBE553B). It is designed to give students rigorous exposure to contemporary investment and portfolio theory and practice. It also allows the students to learn the skills of investment managers through managing a portion of USC’s endowment funds. Analytical tools for the valuation of stocks, bonds, and options will be presented. The course will also cover risk management and portfolio optimization, behavioral finance, and performance attribution. Students will demonstrate and refine their ability to apply analytical concepts and techniques through fund management, sector reports, company research reports, investment research, and security pitches.

History

As a result of a $250,000 gift from Provident Investment Counsel, the Student Investment Fund (SIF) Program was established in 1986. In 1995, an additional $750,000 from alumni and friends of Guil Babcock and USC Marshall School was raised. Three equity portfolios, including Babcock California Fund, Provident Growth Fund, and Trojan Equity Fund, were introduced. Also, with a gift of $200,000 by Robert Rodriguez and First Pacific Advisors, Inc., as well as a total contribution of $400,000 from various donors, a Marshall Fixed-Income Fund was established in June 2004. With a gift of $750,000 by David and Nancy Iben, a Global Equity Fund was established in March 2011. The SIF is hosted by the USC Marshall Center for Investment Studies (CIS) which was initiated by $1 million gift from Larry and Karen Tashjian. The SIF/CIS is guided by its Board of Advisors, including David Iben, Robert Rodriguez, Jim Sarni, Sheldon Stone, Satish Swamy, and Larry Tashjian. As of June 2014, there are 359 SIF alumni in 28 classes. Today, 16 second-year MBA students are managing approximately $6.4 million in four equity and one fixed-income portfolios, each with unique investment discipline.

Purpose

To provide a group of sixteen MBA students with hands-on experience in managing a portion of the University’s equity endowment;

To provide an academic background for the appreciation of security analysis and portfolio management through assigned and self-selected readings;

To enhance the academic experience through interaction with individuals and institutions engaged in the money management business;

To produce and present an Annual Report which will provide description of the course experience and a record of achievement.

Investment Objectives

Since the funds managed are part of the University’s endowment, there is a long-term, principal-conserving aspect to their management. However, because the management of these funds is also intended to serve as a learning experience in a year-long seminar, there is also a shorter horizon in which the student managers are actively trying to beat their benchmark. This dichotomy is accepted and is part of the challenge of developing an appropriate performance attribution.

Portfolio Compositions

The primary constraint on this tax-exempt money is that it shall be fully invested in equities or fixed income securities with no more than 10% in cash. The average size of the individual holdings should not exceed 5% of the total portfolio, and the largest holding should not exceed 10%. For equity, the minimum market cap should exceed $100 million.

The California Small Cap Fund is a domestic small-cap stock fund with at least 50% invested in companies domiciled in California. The Global Equity Fund GEF is an all-cap global fund that invests in the developed and emerging capital markets. The Provident Growth Fund invests in domestic mid-cap growth stocks while the Trojan Equity Fund is a domestic large-cap value stock fund. Finally, the Marshall Fixed-Income Fund invests in at least 60% in domestic corporates, and the remaining in treasuries, MBS, high yield, agencies, preferred stocks and ETFs. Based on the investment guidelines recommended by the CIS Board of Advisors, each group of fund managers develops their own strategy for selecting securities, constructing their portfolio, monitoring their portfolio’s risk and reward, and evaluating their portfolio’s performance.

Resources

The Capital Markets Training Room is located on the second floor of Bridge Hall and has all the elements of a state-of-the-art trading room with information screens, monitors, extensive software packages and research capabilities in real-time. These teaching/research tools and resources aide students in managing their funds. In addition to Barra (Portfolio Optimization and Performance Attribution) and Capital IQ and Morningstar, we also have three Bloomberg terminals. With Scott Johnston’s (MBA ’69) assistance, we have received a generous gift from William O’Neil of its (WONDA) Database for the students.